Government procurement and financial statement certification: Evidence from private firms in emerging economies

Hope, Ole‐Kristian; Jiang, Shushu; Vyas, Dushyantkumar

doi:10.1057/s41267-020-00382-2

Cited by 27 publications

(23 citation statements)

References 40 publications

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“…Especially for private companies, there is no obligation to audit financial statements (Svanström 2014). Therefore, holding financial statement audits in private companies to improve the quality of financial information is carried out for tax purposes (Hope et al 2021). One of the objectives of financial statement audits is to ensure the quality of financial reports and mitigate the possibility of earnings management (Dobija 2020).…”

Section: Literature Review and Hypothesis Developmentmentioning

confidence: 99%

Gender, Perception of Audits, Access to Finance, and Self-Assessed Corporate Tax Compliance

et al. 2022

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This study explores the influence of financial statement audits on tax compliance directly and indirectly through access to finance, and it examines gender roles to improve tax compliance through access to finance and financial statement audits. The sample for this study consisted of 45,504 businesses located in developing countries, as determined by The World Bank Enterprise Survey 2006–2018. The primary findings of this study demonstrate that the audit of financial statements has a positive impact on tax compliance through access to finance. Another result is that firms with female top managers are more likely to comply with their tax obligations than those with male top managers. The key to improving tax compliance is that policymakers should encourage financial institutions to provide more significant opportunities for companies that audit financial statements to access larger amounts of capital and faster disbursement of funds. Firms should provide greater opportunities for women to occupy positions as top managers. It is the company’s responsibility to promote gender sharing programs, particularly for the human resources department. Our study integrates the concepts of financial statement audits, access to finance, and the gender of firm managers into a model to predict how firms comply with their tax obligations.

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Section: Literature Review and Hypothesis Developmentmentioning

confidence: 99%

Gender, Perception of Audits, Access to Finance, and Self-Assessed Corporate Tax Compliance

et al. 2022

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“…In this respect, having financial statements audited is also a crucial governance mechanism to respond to more stringent tax enforcement, especially for privately-held firms (Hope et al , 2021). This issue is important because the economic roles of audited financial statements in privately held (private) firms are less significant than in publicly listed firms.…”

Section: Introductionmentioning

confidence: 99%

“…Furthermore, private firms (especially smaller ones) often prepare financial statements only for tax purposes. Accordingly, they are more likely to hire auditors to ensure that their financial statements comply with tax regulations when tax enforcement levels are higher (Hope et al , 2021). By hiring auditors, private firms expect to reduce the risks of being detected of violating tax regulations and receiving legal consequences for these violations.…”

Section: Introductionmentioning

confidence: 99%

“…Meanwhile, this research operationalizes tax enforcement as the independent variable based on the question's response asking whether the firm was visited or inspected by tax officials. Thus, we use an ex-post measure of tax enforcement in this study (Hope et al , 2021). For secrecy culture, we refer to (Hope et al , 2008) who adopt and modify Gray's accounting secrecy culture (Gray, 1988) based on Hofstede's national culture typology (Hofstede, 1980).…”

Section: Introductionmentioning

confidence: 99%

“…Studies on this issue generally use economics-based arguments to propose factors that affect private firms' decisions to hire external auditors. These factors include increased operational complexity (Allee and Yohn, 2009; Cassar and Ittner, 2009; Dedman et al , 2014; Niemi et al , 2012), higher-agency problems (Cassar and Ittner, 2009; Collis, 2012; Dedman and Kausar, 2012; Niemi et al , 2012) or tax-related motives (Cassar and Ittner, 2009; Hope et al , 2021; Ojala et al , 2016).…”

Section: Introductionmentioning

confidence: 99%

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Tax enforcement and private firms' audited financial statements: the moderating role of secrecy culture

Prabowo

Sucahyo

Damayanti

et al. 2021

JAEE

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PurposeThe research aims to investigate the moderating role of secrecy culture on the effect of tax enforcement on the likelihood that private firms hire external auditors.Design/methodology/approachThe study generates more than 70,000 observations from 83 country-years from the World Bank Enterprise Survey 2018 dataset. Because the study focuses on private firms in emerging countries, data on publicly listed firms and firms from OECD (Organisation for Economic Co-operation and Development) countries are deleted. The secrecy culture data are generated from Hofstede's website. The data are then analyzed with logit analyses because the dependent variable is binary.FindingsThe results demonstrate that tax enforcement increases the likelihood that private firms hire external auditors. Further, secrecy culture weakens the relationship between tax enforcement and audit demand.Practical implicationsGovernments in emerging countries need to encourage private firms to hire external auditors by intensifying tax enforcement because private firms often do not appreciate the importance of high-quality financial statements. However, secretive national culture may reduce tax enforcement's effectiveness in motivating private firms to hire external auditors. Hence, governments of highly secretive countries need to address this issue and find alternative ways to promote audited financial statements.Originality/valueAudit demand of private firms in emerging countries is relatively understudied, especially concerning tax enforcement. Furthermore, the research also focuses on the moderating role of national culture (secrecy) in explaining the relationship between tax enforcement and audit demand.

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Business strategies and corruption in small‐ and medium‐sized enterprises: The impact of business group affiliation, external auditing, and international standards certification

Kyiu

2023

Bus Strat Env

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We examine the impact of three business strategies separately and in combination on the tendency for firms to engage in corruption. Using a sample of 56,827 firm-year observations for small-and medium-sized enterprises (SMEs) over the 2006-2018 period, we find that firms with business group affiliations are more likely to engage in corrupt practices in countries with low business freedom. However, those in countries with high business freedom are less likely to do so. We also find that firms that engage the services of external auditors and adopt international standards are less likely to be corrupt, especially in countries with weak financial reporting standards. Our results also show that corruption intensity reduces even more for firms that employ the three strategies, whether we consider institutional factors or not. This result holds when we use a three-way interaction term. We conclude that the three strategies are mutually reinforcing and that firm-level and country-level efforts complement each other in mitigating corruption.

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Government procurement and financial statement certification: Evidence from private firms in emerging economies

Cited by 27 publications

References 40 publications

Gender, Perception of Audits, Access to Finance, and Self-Assessed Corporate Tax Compliance

Gender, Perception of Audits, Access to Finance, and Self-Assessed Corporate Tax Compliance

Tax enforcement and private firms' audited financial statements: the moderating role of secrecy culture

Business strategies and corruption in small‐ and medium‐sized enterprises: The impact of business group affiliation, external auditing, and international standards certification

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